A Particular Bank Has Two Loan Modification Programs for Distressed

question 82

Multiple Choice

A particular bank has two loan modification programs for distressed borrowers: Home Affordable Modification Program (HAMP) modifications, where the federal government pays the bank $1,000 for each successful modification, and non-HAMP modifications, where the bank does not receive a bonus from the federal government. To qualify for a HAMP modification, borrowers must meet a set of financial suitability criteria. Define the null and alternative hypotheses to test whether borrowers who receive HAMP modifications default less than borrowers who receive non-HAMP modifications. Let p₁ and p₂ represent the proportion of borrowers who received HAMP and non-HAMP modifications that did not re-default, respectively.

• A) H₀: p₁ - p₂ ≤ 0, H_A: p₁ - p₂ > 0
• B) H₀: p₁ - p₂ ≥ 0, H_A: p₁ - p₂ < 0
• C) H₀: p₁ - p₂ = 0, H_A: p₁ - p₂ ≠ 0
• D) H₀: p₁ - p₂ > 0, H_A: p₁ - p₂ ≤ 0

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Definitions:

Total Demand

The entire quantity of a particular good or service that all consumers in a market want to purchase at various price levels during a specified time period.

Marginal Revenue Curve

A graphical representation showing how marginal revenue varies as the quantity of the product sold changes.

Pure Monopolist

A single seller in a market that produces a unique product without close substitutes, controlling the market price.

Perfect Competitor

A theoretical market structure where many firms sell identical products, and no single seller can influence the market price.